What is Pretirement?
What is Pretirement?
Pretirement is the term being used to describe a new phase of life that fits between career and retirement. Traditionally our lives have been divided into three stages - education, career and retirement. But with longer life expectancies, generally better health and the economic need to continue to earn an income, the line between career and retirement is blurring. Emerging from that blur is an entirely new life stage called pretirement.
Over the last 70 years our life expectancies have increased a full 16 years. In 1935 when the FDR signed the Social Security Act and established the official retirement age at 65, the average life expectancy in the U.S. was only 62! Today, it's 78. With more time and better health, the concept of retirement quickly evolved away from the 1930's and 40's perception of "being put out to pasture" and "all used up" to one of an extended vacation.
In fact, by the 1980's and 90's, early retirement was viewed as a sign of success. "He who retires first, wins" became the mantra of millions of corporate employees. But in the early 2000's a variety of studies began to show that retiring early didn't necessarily make a person happy. In fact, according to one study done by the University of Michigan, as many as 60% of early retirees said they were actually happier with their lives before they retired. The researchers concluded what psychologists have been telling us for years - people need a purpose.
Almost overnight, the idea of retirement evolved once again. Now retirement has become a new beginning, a second chance to finally do all the things we've always wanted to do. For those who are financially able, retirement has indeed become a time, as Psychologist Abraham Maslow would say, "to fulfill one's highest purpose."
The problem of course, is that many of us are not financially able.
Long before the 2008 recession and corresponding stock market decline, the financial infrastructure designed to support our retirement was beginning to crack. Social Security, corporate pensions and personal savings rates were all coming up short. As early as 2001, William D. Novelli, Executive Director and CEO of AARP suggested that earned income would be a critical element in securing one’s retirement. With stock market, home prices and 401k values all down significantly, more and more Americans are coming to the realization they will indeed need to continue to earn an income during the years they thought they would spend in retirement.
Fortunately however, many had already been planning to do so. According to a 2005 study by AARP, over 80% of baby boomers plan to continue to work in retirement. More interestingly, 55% of them plan to do so in an entirely new field or industry. People aren't retiring so that they never work again, people are retiring so that they can finally go do what they've always wanted!
It's this combination of the financial need to continue to work past normal retirement age, coupled with the desire to engage in work that is personally meaningful that is spawning the new life stage of pretirement. Not fully retired, not even semi-retired, these "pretirees" are engaging themselves in new careers, new entrepreneurial ventures and new working arrangements that allow them to create the life they've always wanted to lead. Many are heading back to school for additional training or striking out on their own as consultants or independent contractors. The key is that they are leaving behind jobs and careers that had become tedious and dull, and are now pursuing work that is personally fulfilling.
Safe Withdrawal Rate
What is a "Safe" Withdrawal Rate?
One of the most important questions any of us must decide as we prepare for retirement is, "How much can I withdraw from my retirement savings accounts without depleting the balances and risk running out of money?" Whether you're already retired, in the final stages of preparing to retire, or a decade or more away, understanding how much income your accumulated investment assets can generate is critical to your long-term planning...